Finastra and HSBC partner to strengthen foreign exchange services for mid-sized banks

Finastra, a UK-based financial services company, is working with HSBC to offer cost-effective banking-as-a-service (BaaS) foreign exchange solutions to mid-tier lenders.

The service will run on Finastra’s cloud platform and licensed institutions’ regulated infrastructure, the company said Thursday. It will be available from the second half of 2022, starting with financial institutions in Asia-Pacific, with other regions to follow soon after.

The integration of the foreign exchange services of HSBC, the second largest bank in Europe, with medium-sized banks will allow them to provide a wide range of currencies to their customers through branch networks and other sales channels at the detail, without the need for additional technology integration.

“The ability to integrate forex directly into enterprise treasury platforms, along with competitive pricing and liquidity in a single package will help reduce friction for regional banks and their customers and demonstrates a use case in which BaaS can really make an impact,” Angus Ross, chief revenue officer for BaaS at Finastra, said.

BaaS refers to the provision of retail or wholesale banking products and services, as a service using the secure and regulated infrastructure of an existing licensed institution with application-driven platforms. She is also responsible for managing, deploying and delivering critical financial services to end users.

The value of the global BaaS market is expected to reach approximately $7 trillion by 2030, Finastra said in a 2022 industry outlook report.

The BaaS ecosystem

The BaaS value chain consists of four key players:

Consumers: End users of the delivered financial product

Distributors: Also known as embedders, these are companies that integrate bakery services directly into their existing customer journeys.

Facilitators: Typically Big Tech or FinTech companies that help integrate financial services into third-party platforms

Suppliers: Financial institutions holding a banking license and offering regulated products

About 85% of senior banking executives surveyed by Finastra said they were already implementing BaaS solutions or planning to do so within the next 12 to 18 months, according to the study.

The BaaS market is expected to grow more than 50% annually over the next five years, Finastra’s research showed, with those currently offering BaaS offerings focusing primarily on retail banking.

The first phase of the new BaaS service will provide indicative and executable exchange rates to regional mid-tier banks using a plug-in for Fusion Kondor, Finastra’s global treasury operations management system, Finastra said.

This will be backed by the liquidity and strong risk management capabilities of one of the largest foreign exchange franchises in the world.

The service will provide customers with highly automated forex pricing capabilities, allowing banks to process higher forex volumes and maintain customer relationships, according to the release.

Corporate clients, on the other hand, will benefit from increased transparency of prices and market conditions, easier execution and simpler management of currency risk.

HSBC is also considering other partnerships to offer its forex services, said Mark Williamson, the bank’s global head of forex partnerships and proposals.

“We are constantly looking for strategic partnerships and channels to integrate our foreign exchange services and create market-leading customer propositions,” he said.

Updated: July 14, 2022, 11:08 a.m.

The BaaS ecosystem

The BaaS value chain consists of four key players:

Consumers: End users of the delivered financial product

Distributors: Also known as embedders, these are companies that integrate bakery services directly into their existing customer journeys.

Facilitators: Typically Big Tech or FinTech companies that help integrate financial services into third-party platforms

Suppliers: Financial institutions holding a banking license and offering regulated products